The Future of Financial Resilience in the Public Sector

Rob Whiteman, CIPFA CEO

“Change will not come if we wait for some other person, or if we wait for some other time. We are the ones we’ve been waiting for. We are the change that we seek.” – Barack Obama.

If you were to go by the headlines that have dominated the news for the past decade, the state of public sector finances would seem consistently bleak. The news agenda can feel both endless and unchanging – ‘councils under pressure’, ‘NHS in crisis’, ‘cuts for local services’. It makes for pretty grim reading.

In October, it seemed some welcome change was coming with the Prime Minister promising ‘the end of austerity’, but this too proved anti-climactic. Only last month, the National Institute of Economic and Social Research argued that ‘planned spending increases will not be enough to accommodate sustainably the needs of an ageing population and to maintain the quality of public services’. And the Spring Statement was unsurprisingly light on the bold action needed to fix the public finances.

There remains no clear funding strategy for adult social care, unprecedented pressure on children’s services, and no clarity on business rates and fair funding. Growing pressures and reduced resources have tested the resilience of many organisations, and the main solutions offered by government have been cuts and private sector outsourcing.

We have been called upon to be more like the private sector, to be more commercial in our thinking, and to adopt delivery models that some would argue are counter to our public service ethos.

And this is precisely why I kicked off with the quote from Barack Obama. While CIPFA will continue to advocate for sustainable funding solutions for the public sector, the message from government remains depressingly consistent. In short, we must act to generate change in those areas that are within our gift.

That is not to say this isn’t already happening. The sector has proven itself time and time again to be innovative and adaptable in its approach to the challenges it faces.

Furthermore, the demise of outsourcing industry giants like Carillion and Interserve has shown that the private sector is not a panacea. Private sector organisations are now even turning to the public sector for guidance on how to weather financial storms with services intact.

The time is ripe to show that we do not need to be more like the private sector. In fact, we must be proudly public in our approach to financial management – putting people and communities at the heart of planning for the future and protecting services from unexpected shocks.

We at CIPFA have a key role to play in developing the tools that will cement public organisations as vanguards in this space. Tools like the Resilience Index and the draft CIPFA Financial Management Code – currently out to consultation – will ensure the sector is held to collective and robust standards of governance and financial management.

But the design of these tools need careful consideration with input from those who are living and breathing financial management day to day. This includes those operating in scrutiny roles in local authorities. Resources like the Financial Management Code will be a natural aid to those charged with scrutinising spending decisions and helping future proof their authority’s financial position.

A collection of shared principles setting the standard for financial management that the whole sector can buy into will provide scrutiny committees with a solid foundation from which to be an effective and solutions-focused ‘critical friend’ to their organisations.

But if good financial management, resilience in financial strategy and a general improvement in public service excellence is to be achieved, it cannot be done by improvement tools alone. Effective leadership, good corporate governance and timely decision making must include a close and trusted relationship between both council officers and Members. This is why CIPFA will shortly launch its Councillor Advisor Service, a joint initiative with the Centre for Public Scrutiny. The service will improve the financial knowledge of councillors, strengthen understanding between councillors and officers, and offer new networking opportunities.

Sharing thoughts and ideas within and between authorities is how we will generate a community of practice and arrive at the most appropriate and effective solutions to our challenges. In short, public sector organisations must support one another in a spirit of collaboration to make the best of their resources for the vulnerable citizens who need them most.

The public sector is a difficult world to be operating within right now, and we simply cannot depend on this year’s Spending Review to deliver the solutions the sector so desperately needs. Strengthening financial management and providing early warning systems to enable timely action where problems exist is in the public interest. And CIPFA will continue to advocate for, and act in, the public interest. We are the change that we seek.

For further information please contact the CIPFA Corporate Communications team on 020 7543 5737 or email ashleigh.moore@cipfa.org.

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